A basic car insurance policy is going to help you cover a variety of expenses like injury to another party if you are ever involved in an accident. It will also cover property damage that you caused to someone else’s property usually up to $25,000. While that type of insurance is very important to have, you might benefit from upgrading your policy so that it covers higher limits and additional risks.
Uninsured and Underinsured Motorist Coverage
It is an unfortunate fact that countless drivers are out on the road with inadequate insurance or no coverage at all. If you get into an accident with one of those individuals, uninsured/underinsured motorist coverage is going to be invaluable. That type of rider basically acts like the other driver’s policy if they don’t have ample coverage or any type of insurance at all.
Replacement Value Coverage
What happens if you take out a loan and then drive off the car lot and a week later total your car? Most insurance companies will offer you the “actual cash value (ACV)” of your vehicle which is not the retail price you paid (nor what you still owe), so if you bought a new car and paid $20,000 you might only get $18,000 (or less) for your car. So you might consider getting “Gap insurance” which is an optional, add-on car insurance coverage that can help cover the “gap” between the amount you owe on your car and the car’s ACV in the event of an accident.”
When an insurance company says your car is “totalled” it doesn’t mean it is unrepairable, it simply means that it will cost more to repair than the ACV. Unfortunately, insurance companies do not go by KBB.com or Edmunds or any other available site. Each carrier has its own proprietary system for calculating ACV total loss payouts and their first offer will always be to their advantage. You might be able to get a rough estimate of what you should shoot for by using Kelly’s Blue Book “Private Party Value”. The PPV is usually about halfway between the price a dealer will pay you (the wholesale value) and what you would pay to buy it from a dealer (retail value). So the gap you will almost always be out (without gap insurance) is generally the difference between the PPV and the retail value.
If you buy a brand new car there is also New car replacement value insurance which is considerably more than gap insurance. This will get you a brand new car even if you’ve had your current “new car” for several years. Generally, this is only available when you buy your car new from a dealer and keep your insurance with the same carrier.
Bodily Injury
Most states require some type of bodily injury liability insurance, but those minimums are often very low. Following a collision, a long-term injury or lengthy operation might not be fully covered, and that is why many people upgrade their bodily injury insurance. In addition to paying for your medical expenses, a robust bodily injury policy will also cover lost wages. You will continue to receive money even if you can’t work for multiple months, and that type of coverage could keep your family afloat after a major auto accident.
Towing and Labor
Even if you do everything in your power to make sure that your car remains well-maintained, it will probably need to be worked on at least a few times over the years. A towing and labor policy is going to cover some or all of the repairs if your car breaks down while you are driving. Some of those policies even cover maintenance such as oil changes, rotating the tires, and replacing all of the fluids. Before you purchase towing and labor insurance, you should make sure that your car doesn’t already have that type of coverage through the dealership.
Comprehensive
Comprehensive insurance (also known as “other than collision” in some states) covers damage to your car caused by events that are out of your control. It covers things like theft, vandalism, glass and windshield damage, fire, accidents with animals, weather/acts of nature, etc. Comprehensive is an optional coverage. It is most valuable for higher-priced (or newer) vehicles where making repairs could be expensive. If you are driving a $1,000 “beater” you will probably be better off putting the money you would have spent on comprehensive aside toward buying another car since the cost of the insurance might be more than the car is worth.
Illinois Insurance Center Inc says, “When customers don’t shop around and compare rates, it’s not hard to get ripped off by shady insurance providers. Before purchasing insurance, we recommend doing some reading so you understand the basics. Learn what premiums and deductibles are and what the best balance of the two is for your particular situation. Get a grasp of what typical insurance plans cover and compare this to your individual needs. Research the various providers and figure out which ones have good and bad reputations.”
After a collision, you should always try to file a claim with your insurance provider as soon as possible. Most insurance providers have very strict rules regarding when claims can be filed, and you might not receive compensation if you don’t file that paperwork right away.
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